Monday, September 23, 2013

EPA Releases Revised Performance Standard Requiring CCS

Last Friday, the EPA released a revised New Source Performance Standard (NSPS) intended to regulate CO2 emissions from new fossil fuel-fired power plants. The EPA issued its initial draft standard in March 2012, which called for limiting power plant emissions to a maximum 1,000 pounds of CO2 per MWh of electricity generated per facility (see Calls Intensify for More Global Action on CCS, 5/16/12). After a year of pushback from the coal industry (see EPA Advancing CCS Rule for New Power Plants, 7/5), EPA decided to split the standard in two, with one rule applicable to most natural gas plants and another to coal plants. Specifically, large (i.e., greater than 850 mmBtu per hour) new gas-fired turbines, which are inherently cleaner than coal-fired plants, would remain subject to the 1,000 pounds CO2 per MWh rule, but new coal-fired units would be limited to a slightly less rigorous standard of 1,100 pounds CO2 per MWh. This would effectively require all new coal plants to be equipped with CCS. (Small new gas plants would also be limited to 1,100 pounds CO2, while coal plants would have the additional option of meeting a marginally tighter but more flexible standard of 1,000-1,050 pounds CO2 per MWh averaged over seven years.)

The coal lobby and its political backers have responded to EPA's revised proposal by accusing the Obama Administration of waging a "war on coal." With mid-term elections coming next year, Republicans will attempt to use this issue against their Democratic opponents in states with significant coal operations, in particular West Virginia and Kentucky. On the eve of the rule's release, Senate Minority Leader Mitch McConnell (R-KY), who is up for re-election in 2014, began the counterattack by declaring that "The President is leading a war on coal and what that really means for Kentucky families is a war on jobs." Coal companies themselves will blame the proposed rule for their industry's declining fortunes, despite the fact that coal has been steadily losing market share for years largely due to the flood of cheap natural gas made available by hydraulic fracturing techniques.

Environmentalists, meanwhile, view the revised NSPS as the prelude to a much larger battle to come next year, when the EPA will unveil a new performance standard for existing power plants, for which the economic stakes are substantially higher. The proposed standard for existing plants will be issued no later than June 1, 2014. The current, revised standard for new plants is now subject to a 60 day comment period, and, depending on the outcome of possible court challenges, could take effect as early as fall of next year.

From the perspective of geoengineering, the promulgation of this revised standard is very encouraging. Most importantly, it will help reduce emissions from the coal industry. If new coal plants cannot comply with the new requirements, then they will not be built. If they can comply, then the construction of new coal-fired plants with CCS systems will almost certainly contribute to declining costs across all segments of the CCS chain, valuable practical experience through "learning by doing," and enhanced preparation for extending CCS to industrial facilities. And these gains will in turn accelerate the development of BECCS and the transport and storage dimensions of direct air capture (DAC). Realizing such benefits, however, will depend entirely on the legal wrangling and political maneuvering to follow in the months ahead.